Asian markets mixed as Korea, Japan bounce back

LeslieShaffer

Ga-WoonPhilip Vahn

TOKYO (MarketWatch) — Asian markets were mixed Wednesday, with the Tokyo and Seoul markets finishing lower but staging recoveries from early selloffs on hopes that regional tensions will be short-lived.

Japan’s Nikkei Stock Average (NI225) closed down 0.8%, after falling as much as 2.1% during the session, and South Korea’s Kospi Composite ($SEU) ended 0.2% lower after losing as much as 2.4%.

Sentiment initially took a hit as many Asian investors got their first chance to react to Tuesday’s North Korean artillery attack on a South Korean island. But buying quickly picked up as concern that the conflict might escalate receded.

“Our take is that the Korea situation will quiet down very soon,” said Richard Hastings, a strategist at Global Hunter Securities.

“We are more concerned about very wide credit spreads hitting the sovereign debt issued by Spain and the amount of funding inevitably needed to assist Spain,” he said.

“This is going to be the single biggest market crisis to contemplate over the next few months ­— more materially identifiable than the Korea situation for now.”

In Seoul, some big-cap stocks reversed early losses, while foreigners also bought into beaten-down stocks, suggesting that offshore investors were discounting geopolitical risks.

Foreign investors were net buyers on the Korean bourse, picking up 19.4 billion won (US$16.9 million) of shares, easing concern that the exchange of fire between the Koreas might prompt investors to aggressively repatriate funds.

Japan, Australia cut losses

After a holiday Tuesday, the Japanese market resumed trading, cutting its losses by the close. The market was weighed down by exporters as the euro extended its decline on continuing concern that Ireland’s debt problems may spill over to other euro-zone countries.

“It looks like the geopolitical (tensions) from the North Korean problem will not drag on for too long, so markets are reacting relatively calmly,” said Takashi Ushio, general manager at Marusan Securities.

But Elpida Memory Inc. (6665)
ELPDF
gained 1.3% by the close after earlier weakness.

Shinsei Bank Ltd. (8303)
SKLKF, +0.52%
declined 1.3% after saying it will form operating alliances with Vietnam’s leading financial group, Bao Viet Holdings, and an Indian private-sector bank, Yes Bank.

Bucking the trend, Sojitz Corp. (2768)
SZHFF, +0.00%
jumped 9.1% after reports that the trading house has agreed to obtain the right to buy about 8,500 tons of rare-earth metals, representing nearly 30% of annual demand in Japan, from Australia’s Lynas. Australia hasn’t exported any rare-earth metals to Japan since 2004, according to official data.

The Sydney market also closed off its session lows. Declines were led by the industrials and consumer-discretionary sectors, with Leighton Holdings Ltd. (LEI)
LGTHF, -33.27%
down 1.4%. But energy and materials companies attracted support after Tuesday’s selloff. BHP Billiton Ltd. (BHP)
BHP, +1.88%
shed 0.4% while Woodside Petroleum Ltd. (WPL)
WOPEF, +0.00%
tacked on 0.5%.

“Losses across the ‘risk’ sectors such as materials and energy were greatly pared, with investors on the lookout for cheap entry prices into quality names that have been beaten down in recent weeks,” said Ben Potter, market strategist at IG Markets in Melbourne.

Industrial & Commercial Bank of China (601398) said Tuesday it raised 33.67 billion yuan (US$5.07 billion) from the Shanghai portion of its rights issue. The stock ended down 10% at 4.42 yuan in Shanghai.

New Zealand Oil & Gas Ltd.
NZEOF, +0.00%,
which holds 29% of Pike River Coal Ltd. (PRC), pared most of its early gains after New Zealand police said there was a second explosion at Pike River Coal’s mine and all the 29 trapped miners were dead. The stock, which slumped 29% on Tuesday after coming off a trading halt, rose 2.3% by the close.

The euro bounced back from two-month lows despite Standard & Poor’s lowering Ireland’s sovereign credit rating on expectations the Irish government will borrow above projections. Traders said the move was priced into the market and many players covered short positions ahead of Thursday’s Thanksgiving holiday in the U.S.

The euro
EURUSD, +0.7313%
was trading at $1.3392 compared with $1.3369 late Tuesday in New York, and
EURYEN
at 111.29 yen against the yen, compared with 111.19 yen. The dollar
USDYEN
was at 83.09 yen compared with 83.16 yen.

“Although the Irish situation has not yet been resolved and political uncertainty remains high, attention is once again shifting away from the current ‘crisis point’ to the next European bailout candidate,” said RBC Capital Markets senior strategist Matthew Strauss in a report.

The Korean won slipped against the U.S. dollar, which rose to a two-month high of 1,175 won. Investors sought the safe-haven greenback following the skirmish on the peninsula. The dollar bought 1,142.3 won, compared with 1,137.5 won late Tuesday in Seoul.

Lead December Japanese government-bond futures added 0.13 to end at 141.36 points, while the benchmark cash 10-year JGB yield was flat at 1.125%.

Among commodities, January crude oil futures
CLF11
were up 44 cents at $81.69 a barrel on Globex.

Spot gold was at $1,375.50 a troy ounce, down $1 from the New York close.

But Martin Hennecke, associate director at Tyche Group said his company remains “heavily invested in gold and silver, including physical bullion, mainly due to the escalating deficit crises both in Europe and the U.S.”

“Precious-metals bullion, of course, would also be an insurance against the possibility of a further escalation of political tensions in Korea or elsewhere,” he said.

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